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Beating financial crime requires agility and foresight

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Forget keeping up with the criminals. The financial services industry needs to get ahead of them.

But there’s an inherent challenge. Financial criminal behavior is by its nature active and creative. Meanwhile the established ways of countering fraud, money laundering or terrorism funding tend to be re-active and less dynamic.

Traditional anti-crime methods are failing

Historically, banks, credit unions and other financial service providers have responded to what the criminals did last. Often that’s too late, as well as being inaccurate. The difficulties are exacerbated by the silo effect created by perceived difficulties in sharing information.

Sadly, this approach doesn’t work well. Not only does it take up significant resources, it is also estimated that money laundered globally could be as much as 5% of worldwide GDP – yet less than 1% of this is seized annually*.

The current rules-based checks against fraud use pre-defined rules which may not pick up new or anomalous activity, while at the same time generating high levels of false positives*. The situation is made worse when many organisations work in isolation (the silo effect) thus making it even harder to spot suspicious behavior.

Some banks have started to work together

In 2020 five Dutch banks decided it was time to work together. The route they took is described by Rein Graat, ING’s Chief Compliance Officer, writing recently in The Fintech Magazine*. It’s a helpful insight into how working together helps them better understand patterns of behavior likely to be criminal. This includes the use of multiple accounts, shell companies, and ‘mules’ (often unknowing), as well as legitimate businesses.

The Dutch system uses Transaction Monitoring Netherlands (TMNL), through which the banks share anonymized data, and which works closely with law enforcement agencies. It’s a significant improvement on each bank acting in isolation.

Large institutions tend to develop costly large scale solutions

However, because it is still rules-based , and because it functions through a newly created agency, adopting this model risks being expensive and, relative to the challenges of financial crime, cumbersome.

Many financial institutions simply won’t have the appetite for the cost and inconvenience of what may soon seem to be an outdated solution. Graat himself seems to recognize this and already advocates AI based behavioral monitoring.

The next step: agile and intelligent behavioral monitoring accessible to all

It’s this last insight that’s most important, especially the implication that behavioural monitoring can be more agile, sensitive and cost effective than a conventional rules-based solution. Compli, from Essiell Compli is a case in point.

Compli is a suite of services designed to safeguard businesses globally, from KYC  and ensuring seamless adherence to anti-money laundering regulations, to checks to combat the financing of terrorism, sanctions busting, and fraud.

Crucially, Compli has several powerful features, including

  • behavioral monitoring which provides real time surveillance
  • the ‘global person concept,’ which creates individual profiles from multiple databases and
  • the capability for collaborating businesses to share data securely without an intermediary agency.

Compli functions globally and delivers rich, accurate data so you can make informed risk-based decisions. The services within Compli are customizable and scalable.

And on top of this, Compli is easy to use, does not depend of system upgrades, and is highly cost effective.

By Bjorn Larsson, Chairman of Essiell Compli.

If you’d like to find out more  about how Essiell Compli and Compli can help your business stay safe, remain compliant, and defeat financial crime, why not book a call back or a demo?

You can also get in touch via our website www.essiell-compli.com ,  or by email to enquiries@essiell-compli.com   

* Quoted in Fintech Finance News / The Fintech Magazine, October 20 2023

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